Carbon Trading Policy, Institutional Pressure Heterogeneity, and Enterprise Total Factor Productivity: Empirical Evidence from a Multi-Period Difference-in-Differences Approach

Yunshan Xie — Tue, 16 Jun 2026 13:08:39 +0800

As China advances its green transition, increasing attention has been paid to whether carbon emissions trading policies can improve both environmental performance and economic efficiency. Using panel data for Chinese listed companies from 2010 to 2024, this study applies a multi-period difference-in-differences (DID) model to examine the effect of the carbon emissions trading system on firms’ total factor productivity (TFP). The results indicate that the carbon trading policy is associated with a significant increase in enterprise TFP. Further analysis shows that different policy arrangements during quota accounting, quota allocation, and quota trading affect firms in different ways. In particular, baseline-based accounting methods, paid quota allocation, and higher carbon prices are found to have positive effects on TFP. The heterogeneity analysis further suggests that the positive effect of the carbon trading policy is more evident among non-state-owned enterprises and firms outside high-carbon and heavily polluting industries.

Proceedings of Business and Economic Studies

Carbon Trading Policy, Institutional Pressure Heterogeneity, and Enterprise Total Factor Productivity: Empirical Evidence from a Multi-Period Difference-in-Differences Approach